Time-varying causality between stock prices and macroeconomic fundamentals: Connection or disconnection?

Vincent Fromentin

Finance Research Letters, 2022, vol. 49, issue C

Abstract: This study investigates the connection/disconnection between the stock market and macroeconomic fundamentals in the United States from January 1960 to December 2021. Using a recent time-varying Granger causality framework, tests revealed asymmetric bidirectionnal causality. The lead-lag relationships between stock prices and key macroeconomic indicators are more prevalent during recession phases. However, the significance and intensity of the causal relationships during the Covid crisis varied greatly; which could indicate a possible disconnection.

Keywords: Stock market; Macroeconomic variables; Time-varying causality (search for similar items in EconPapers)
JEL-codes: C32 E44 G15 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:49:y:2022:i:c:s154461232200304x

DOI: 10.1016/j.frl.2022.103073

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